The Shell Decision: Climate Change in the Courtroom

A Landmark Decision

The recent ruling of the District Court of The Hague against Shell has raised high waves – sharply criticised by some, celebrated as a decisive victory for the environment by others. Indeed, the decision is highly remarkable. For the first time, a court – albeit “only” a court of first instance – ordered a company to drastically reduce its CO₂ emissions (by 45% relative to 2019 levels until 2030). In principle, this reduction obligation concerns the entire scope of direct and indirect (i.e., those occurring in the supply chain and those emitted by end-users of fossil fuel products) emissions, which implies a revamping of the business strategy of one of the world’s largest oil and gas companies.

The process sheds light on a whole series of key questions in the climate debate: What responsibilities do companies have, in addition to those of states and consumers? What legal relevance do the findings of climate science and scenarios have with respect to achieving the desired transition of the global economy to “net zero” by 2050? Are goals and ambitions for CO₂ reduction proclaimed by companies justiciable? Can a court judge a company’s business strategy? Many of these questions are largely unresolved. It is therefore most welcome that a court – unprecedented in this depth – has assessed them and delivered a binding decision. This is the only way to move forward a discussion that otherwise threatens to dry out in aimless debates.

The focus on private actors is new in the climate context. For almost thirty years, the issue has largely been left to the international level, under the umbrella of the United Nations Framework Convention on Climate Change (most recently with the adoption of the Paris Agreement). As far as the reduction of greenhouse gases is concerned, this regime has largely failed to have its desired effect. One main reason for this is that the binding force on states is low. International climate targets are therefore even less binding for companies, one might think. However, corporate headquarters decide whether new fossil fuel fields are made accessible and existing ones fully exploited, or whether investments are made in renewable energies instead.

Individual Climate Responsibility for a Company?

The declared goal of so-called strategic climate litigation is to use courts to “enforce” the binding nature of goals such as those of the Paris Agreement. Accordingly, this is not about monetary incentives, but the interest in a liveable planet. The ruling emphasises Shell’s legal responsibility to do its part to achieve internationally (and nationally) recognised climate goals. Shell is therefore not allowed to limit itself to moving (or, not moving) in step with society, but must adapt its strategy independently of societal developments. As the decision shows, a company does have a legal responsibility.

Some complain that the Hague court has made a political decision to which it is not entitled. This criticism is misguided. If a court were to refuse to rule on a matter because it is of great social relevance, it would be limited to rule on parking fines, neighbourhood disputes and the like. It would thus ignore its constitutional task of serving justice. That would be a political act.

Finally, the judgement raises the question of whether it can be “reproduced” in other countries. The legal basis (as in the “predecessor judgement” Urgenda v. the Dutch State) was an openly framed duty of care in the Dutch Civil Code. In order to specify the standard of care owed by Shell, the court took into account numerous legal and factual circumstances. Central to this were, in particular, the findings of climate science, human rights under the European Convention on Human Rights (ECHR) and internationally recognised standards for responsible business conduct. Many countries, including Switzerland, have standards in their legal tradition that are comparable to the relevant Dutch provision in the Shell decision. However, the judicial “appetite” for issuing unprecedented rulings with far-reaching consequences may differ from country to country. The Dutch courts have now repeatedly demonstrated that they do not shy away from doing just that.

First published in German in Neue Zürcher Zeitung on 12 July 2021 (see here)

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